Forget the dollar, think of the future. That’s the advice from South Australian Premier
Jay Weatherill
as he explains his government’s approach to keeping car manufacturer GM Holden on these shores.

Weatherill, together with the federal and Victorian governments, is negotiating a large new assistance deal with the Detroit-based motoring giant to keep its automotive design and manufacturing businesses operating in Australia.

The negotiations with Holden, which has its big factory in the Adelaide suburb of Elizabeth, present a major test for a Premier only a few months into the job.

Interestingly, his stance on the rationale for assistance is directly at odds with the public arguments from his federal Labor colleagues, including Prime Minister
Julia Gillard
.

He firmly tells The Australian Financial Review the aim is not about finding a way to ride out a blip in the dollar.

“That’s not been our argument," he says. “We have never really approached the debate on the basis that it was dependent on the Australian dollar. Our approach has been about maintaining skills and capabilities in South Australia in advanced manufacturing.

“Our argument is that we want to see a secure niche in Holden’s global plans for our manufacturing within the global supply chain."

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One of the most cited justifications for assistance, from the Prime Minister down, is that manufacturers need help to deal with a dollar that has soared from buying US62¢ in 2008 to $US1.05.

Weatherill’s statements that his state’s philosophy is not linked to smoothing out the vagaries of the exchange rate were made on the same day former Reserve Bank of Australia governor
Bernie Fraser
argued in the Financial Review against using the dollar as a justification for assistance.

The South Australian Premier does agree with his Labor counterparts that the loss of Holden, the state’s sole remaining car maker, would be devastating to prospects for local industry.

“If you had a catastrophic collapse of your existing manufacturing base it would be very difficult to grow your advanced manufacturing industry from the wreckage and dislocation that would cause," he says.

“[But] we do need to move up the value chain if we are to have a secure future, regardless of where the dollar sits. There are examples of car manufacturing countries that manage to be successful despite high exchange rates. We can be a successful manufacturing country with a high exchange rate if we move up the innovation and technology value chain."

Weatherill says the deal with GM Holden, to be resolved in the next few weeks, will need to help that transformation happen, and funding milestones will be attached to this process.

“We want to get something for our money," he says. “The things we are asking for are things GM can agree to."

Weatherill says the open divisions among conservative politicians have hampered negotiations with a car company considering long-term investments. He is also scathing of the federal opposition’s pledge to cut $500 million from car industry assistance.

While he concedes jobs could go even after a deal is concluded, he says he is confident the eventual agreement will give security to the “overwhelming majority" of workers at Holden until 2020.

“We really want the agreement to achieve more than that," Weatherill says.

“We want not only the platform for retaining employment but growing employment. We want it to provide the basis for security beyond 2020, so we’re not back with similar discussions in a few years’ time."

He strongly defends the argument that the spin-off benefits from the car industry justify its special access to public funds.

“You are faced with the real-life choices you have. We are faced with the very real-life choice of no car manufacturing industry after 2016. That has to be weighed against some of the other opportunities for investment and the effect they will have on advanced manufacturing. The sudden disappearance of a car manufacturing industry would have a devastating impact on our ability to develop an advanced manufacturing sector."

Defence is one such industry that has shown some promising signs for the state, with Adelaide home, for example, to the Australian Submarine Corporation. During the interview, Weatherill shows off a perspex 3D “hologram" he received of a joint strike fighter on his recent tour to the United States, where he announced part of the beleaguered war plane would be built in South Australia.

Weatherill also bats away another criticism that the government’s move to support the car industry, particularly through payments to GM Holden, could stifle BHP Billiton’s ability to source the massive increase in labour it would need for the Olympic Dam expansion project, not least because of timing factors.

“In a textbook that is how it works. The reality is that those skills are not immediately transferrable in that way," he says. “As transformative as the mining industry is, its true benefits lie in an ability to create off the back of it an advanced manufacturing industry. We don’t want to destroy that just because we are seeking to supply a workforce to the mines."

Although he has had three months to settle into the role of Premier, Weatherill’s office shows little sign of his influence save for some family photographs and framed portraits of Barack Obama, Martin Luther King Jr and Nelson Mandela, courtesy of an enthusiastic supporter.

The fledging Premier faces other immediate political challenges in the shape of two byelections on the same day next month in the seats formerly held by Mike Rann and his long-serving deputy and Treasurer, Kevin Foley. Labor is expected to lose little skin in the process but byelections are seldom enjoyable for governments.

Then there is the contentious sale of the state’s forestry assets and the crafting of his first budget, which will be framed, necessarily, by austerity due to falling revenues and a struggle to meet savings targets.

“I think there will be very little room for additional expenditure," he says. “If there would be substantial increases in public expenses in some area there would be reductions in others. In the current environment that will be more important than in the past decade."